Malaysian legal

system & law of

contract
FOR CODE LAW 277, LAW 416 & LAW
446
WAN MARDIANA WAN MUSA
UITMT 2019/2020
WHAT
IS
LAW?
WHY HUMAN NEED
LAW?
DEFINITION OF LAW

OSBORN’S CONCISE LAW DICTIONARY: A law is an

obligatory rule of conduct.

Hobbes (1500+/-): The commands of him or them

that have coercive power.

Salmond (1800+/-): Body of principles recognized

and applied by the State in the administration of
justice.
Austin (1970s): A law is a rule of conduct imposed
and enforced by the Sovereign.
CLASSES OF LAW

 Private vs Public

 Civil vs Criminal

 National vs International
TOPIC 1: THE MALAYSIAN
LEGAL SYSTEM
Sources of Law
** Written Law
** Unwritten Law
Judicial System in Malaysia
**Hierarchy of Courts
**Jurisdiction of Courts
 SOURCES OF MALAYSIAN
LAW

Federal
Constitution
Written
Statutes State Constitution
Law
Sources English Delegated
of Law Legislation
Legislation
Malaysia Unwritte Judicial
n Law n Law Precedent
Custom
Islamic
Law
 CUSTOMARY LAW

Following lineage
Adat of father
Temenggong Resembles Islamic
teaching
Malay Customary Law
Following lineage
of mother
Adat Pepatih Customary
property passed to
daughter
 CUSTOMARY LAW

Hindu Marriage according

Customary to Hindu rites are
Other Customary Law; Law recognized by law
basically limited to family
matters & inheritance Chinese are
Chinese polygamous
Customary Law Reform
Law Marriage &
Divorce 1976
 ENGLISH LAW

 English Common Law

 Equity
 English Commercial Law
 English Land Law

 Question: What are the status of the above in

Malaysia?
 Important notes on
application of english law
in malaysia
 English law is one of the unwritten sources of law in
Malaysia.
 Reference should be made to the Civil Law Act 1956
(CLA) regarding English law.
 Note that application of English law in Malaysia is not
binding. It can only be applied when the (english) law
suits the local circumstances and in the absence of
statutes.
 It is very important to note the cut-off dates for the
application of the same in Malaysia.
 Cut-off dates to apply
english law in malaysia
 Section 3(1)(a): English law and equity is applicable in
Peninsular Malaysia as administered in England on 7th
April 1956.
 Section 3(1)(b): English law, equity and statute of
general application is applicable in Sabah as
administered in England on 1st December 1951.
 Section 3(1)(c): English law, equity and statute of
general application is applicable in Sarawak as
administered in England on 12th December 1949.
 the status of english
commercial and land law in
malaysia
 Section 5(1): English commercial law is applicable in
West Malaysia as administered in England on 7th April
1956.
 Section 5(2): English commercial law is applicable in
Melaka, Penang, Sabah and Sarawak as administered
in England when the issue arise.
 Section 6: English land law is not applicable to
Malaysia.
 See: UMBC V Pemungut Hasil Tanah Kota Tinggi
Held: English land law was not applicable in Malaysia as
the National Land Code provides for the matter.
Why the cut-off dates

 This means after the dates mentioned above, our

country is not bound to follow the English law.
However, the usage or application of English law into
our legal system is persuasive.
 The reason is to encourage us to develop our own law
to suit our needs and local circumstances.
 Note: Cut-off means the point which something
ceases to operate or apply. [chambers giant paperback
dictionary]
 Judicial precedents

 Besides English law and equity, other sources of

Malaysian Law is judicial precedents or judicial
decisions.
 Judicial decisions can be found in courts. It is the
practice of the courts to follow the precedents of the
previous decided case.
 Basically decisions made by a superior court will bind
the lower courts as well as itself in similar situations.
This rule is also known as “Stare Decisis”, which
means “to stand by cases already decided.”
 Judicial precedents

 The doctrine works 2 ways, vertically and horizontally.

 Vertically: the Superior Courts bind all courts
subordinate to it.
 Horizontally: the courts are bound by its own
decisions, the decision of its predecessor and the
decisions of the courts of co-ordinate jurisdictions.
 Judicial precedents

TYPES OF PRECEDENT

Declaratory Distinguish
Original precedent: the precedent: the
precedent: the judge applies judge does not
judge make his the existing apply the
own precedent rules without previous
extending it decision
 Judicial precedents

 The judges are only bound to follow the RATIO

DECIDENDI of the previous case, which are the
precedent of such case and not the OBITER DICTUM.
 What is ratio decidendi? Ratio decidendi means the
legal reasoning given by the judge for deciding as
such.
 What is obiter dictum? Obiter dictum means saying by
the way, whereby it is an opinion of a judge which may
not be relevant to the issue in question.
 However, an obiter of a judge can be a ratio/ reference
in another case.
JUDICIAL SYSTEM IN MALAYSIA

 Hierarchy of Courts ** Application of Judicial

Precedent in hierarchy of courts in Malaysia
 Jurisdiction of Courts
** Federal Courts
** Court of Appeal
** High Court
** Sessions Court
** Magistrates’ Court
HIERARCHY OF COURTS
MALAYSIA VS ENGLAND
HIERARCHY OF COURTS
MALAYSIA VS ENGLAND
FEDERAL COURT

COURT OF APPEAL

HIGH COURT OF HIGH COURT OF

MALAYA SABAH & SARAWAK

SESSIONS SESSIONS
COURT COURT

MAGISTRATE’S MAGISTRATE’S
COURT COURT
JURISDICTION OF COURTS

 Superior Courts

Federal
Court
Court of
Appeal

High Court
JURISDICTION OF COURTS

 Federal Court
 Hears civil appeal from the Court of
Appeal.
 Hears criminal appeal from the Court
of Appeal only where the case was
heard by the High Court in its original
jurisdiction.
JURISDICTION OF COURTS

 Court of Appeal
 Hears civil and criminal appeals against the decision of
the High Court.
 High Court
 Can try all criminal cases.
 Can try all civil cases (except motor vehicle accident,
landlord & tenant and distress).
 Has original jurisdiction to hear grant of probate,
divorce, bankruptcy, enforcement of trust cases.
 Has appellate jurisdiction to hear civil and criminal
appeals from lower courts.
JURISDICTION OF COURTS

 Sessions Court
 Hears all civil cases exceeding RM100,000-00 but not
exceeding RM1million. However, Sessions court has unlimited
jurisdiction over cases involving motor vehicle accidents,
landlord & tenant and distress.
 From 1 March 2013, Sessions Court can try all actions for
specific performance or rescission of contracts or for
cancellation or rectification of instruments which the monetary
value does not exceed RM1million.
 Sessions court has no power to hear matters pertaining to
probate and administration of estates, divorce, guardianship or
custody of infants and bankruptcy.
 Sessions court also can hear all criminal offences except
offences punishable with death.
JURISDICTION OF COURTS

 Magistrates’ Court
 Magistrate courts can try civil claims not exceeding
RM100,000-00.
 Magistrate courts can try criminal offences that are
punishable with a maximum term of 10 years or
punishable by fine only.
 However, a magistrate can only pass a sentence not
exceeding 5 years imprisonment; a fine up to
RM10,000-00, whipping up to 12 strokes or
combination of the above.
TOPIC 2: LAW OF CONTRACT

Topics covered:
** Elements of Contract
** Free Consent
** Discharge of Contract
** Remedies for breach of contract
Law of contract: tools
needed:
** Contracts Act 1950
** Recommended reading:
✓ Business Law; by Lee Mei Pheng and Ivan Jeron Detta pg
131-228
✓ Hospitality Law; by Gan Joo Ee and Goh Hoon Huar;
2014 pg 11-64
✓ Principles of the Law of Contract in Malaysia; by Syed
Ahmad Alsagoff
AGREEMENT VS
CONTRACT
What is agreement?
Contract must be legally
enforceable; agreement
may not be legal
Contract is not necessary a
written agreement drafted
by a lawyer.
Contract can be made in
writing, oral or conduct.
Elements of contract

Legality of Offer
object
Acceptance
Free
Consent
Elements
of
Intention to Contract Consideration
create legal
relations
Certainty
Capacity to
contract
1st Element: Offer

 Section 2(a) of the Contracts Act 1950 : Definition

 Offeror vs offeree
 Promisor vs promisee
 Proposer vs acceptor
 Types of offer
✓ Unilateral offer / public
✓ Bilateral offer / specific
** See: Carlill v Carbolic Smoke Ball Co.
Offer vs invitation to
treat
 Offer  Invitation to treat
✓ Willingness to do ✓ Non-binding statement
something or abstain or conduct that invites
from doing something offer
✓ Example: Would you ✓ Example: How much is
like to buy the Furla this Furla handbag?
handbag that I’m (request for information &
selling? supply of information)
What is
this?
AN ADVERTISEMENT
SELLING PERFUME
An
offer?
OR INVITATION TO
TREAT?
Offer vs
invitation to
treat
Invitation to treat
Non-binding statement
or conduct that invites
offer
(request for information
& supply of information)
Example: How much is
Let’s Bengkong’s corset?
Discussion:

 Q: Is an online promotion an offer?

See: eBay International AG v Creative Festival
Entertainment Pty Ltd [2006] FCA 1768
Held: A contract can be made online where a
purchaser clicks the relevant buttons
agreeing to the terms and conditions, makes
payment and receives the webpage and email
confirmation of the order.
Discussion:

 Q: Is the travelling agencies or airlines

company has the right to amend/change
the “purchased” made by the customer?
 A: What the travel agency usually does is
by inserting in their “terms and
conditions” that they deserve the right to
change any element in the package or
refund the money altogether.
Communication of offer

 Communication means: knowledge of the offer

 Without knowledge of the offer, the acceptor
CANNOT accept the offer.

 ACCEPTANCE VS COINCIDENCE
 R V CLARKE
TERMINATION of offer

COUNTER
OFFER LAPSE OF TIME

ACCEPTOR DOES
DEATH / MENTAL
NOT FOLLOW THE
INCAPACITY OF THE
OFFEROR
OFFEROR
CONDITIONS
2nd ELEMENT: ACCEPTANCE

Section 2(b) of the Contracts Act

1950 : Definition
Rules of Acceptance
Exception to the rule
Revocation of Acceptance
Rules of acceptance

Positive form-oral, written, action

POSITIVE Felthouse v Bindley

Absolute & unqualified

FIT Section 7 (a) of the Contracts Act 1950

Within time frame given / reasonable time

TIME Ramsgate Victoria Hotel Co Ltd v Montefiore

COMMUNICATION Communicated by the acceptor or his agent

 RULE 1: ACCEPTANCE MUST BE I N POSI TIVE FORM.

Q: Can silent amount to acceptance?

Rules of A: Felthouse v Bindley: NO

acceptance
RULE 2: ACCEPTANCE MUST FI T THE PROPOSAL.

Acceptance w ith conditions other than stipulated in the proposal

amounts to “counter-offer” w hich terminates the original offer made
by the offeror. Counter-offer is not an acceptance because
contradict the rule that acceptance must fit the proposal.
 Hyde v Wrench: The offeror offered to
sell his farm for 1000pounds but the
offeree agreed to buy for 950pounds
only. This is a counter offer thus not a
valid acceptance.

RULE 3: WITHIN TIME FRAME GIVEN /

REASONABLE TIME

Rules of
acceptance
Reasonable time depends on the
type and nature of the contract.

Ramsgate Victoria Hotel Co Ltd v

Montefiore : Reasonable time in
context of an offer to sell shares
would be short.
 RULE 4: COMMUNICATED BY THE
ACCEPTOR OR HIS AGENT

It means the offeror must be

Rules of informed of the acceptance
made by the offeree. Acceptance
acceptance can be in the form of words or by
conduct.

Carlill v Carbolic Smoke Ball:

Acceptance made by the offeree
through conduct is valid.
  General Rule: Section 5(2) of the Contracts Act
REVOCATION 1950 [anytime before communication of
of acceptance is complete]
acceptance  Counter Offer: Hyde v Wrench
 Failure of acceptor to fulfill certain condition
precedent to the acceptance
 Cf: Section 4(3) & Section 4 Illustration (d)
3rd Element:
CONSIDERATION
Types
Definition Executed;
Section 2(d) CA 1950 Executory;
Past

Exceptions
Rules Section 26 (a)
Section 26 CA 1950 Section 26 (b) limb 1 & 2
Section 26 (c) of CA 1950
 Based on the definition of
consideration, we can categorize
consideration into THREE types:

Executory: consideration made in

future
TYPES OF
CONSIDERATION
Executed: Consideration in return
of an action/ performance

Past: promise made after

consideration is given.
Rules of CONSIDERATION

CONSIDERATION NEED CONSIDERATION MUST CONSIDERATION MAY

NOT BE ADEQUATE BE SUFFICIENT COME FROM A THIRD
PARTY
Rules of CONSIDERATION

 Agreement without consideration is VOID

 Consideration need not be adequate- As long as
there is consideration, the law is not concern on
how much your consideration is. For example, Ali
offered to sell his motorcycle to Abu for
RM1,000-00 even though the market value of the
motorcycle is more than that. As long as Abu paid
the consideration asked by Ali, the contract is
valid. Refer to: Phang Swee Kim v Beh I Hock
Rules of CONSIDERATION

 Consideration must be sufficient- the concept of

sufficient here is that the consideration given must be
in return to a new performance, not the existing
duties of someone. For an example, a maid’s job
includes cleaning the house. If once in a while the
maid is asked to clean the attic or warehouse, it is still
part of her job and does not entitle her to claim for
more consideration from her employer. Refer to:
Stilk v Myrick VS Heartley v Possonby
Rules of CONSIDERATION

 Consideration may not come from the

Promisee; i.e can come from a third party- For
example, a student took a loan from PTPTN
but after graduation he has not enough money
to pay back the loan. His father pay on his
behalf. PTPTN does not concern where the
money comes from as long as there is
payment. Refer to: Venkate Chinnaya v
Verikatara Ma’ya
Exceptions: the situation when
a consideration is not required.

 Promise made between persons standing in near

relation; i.e. husband and wife, parents and children,
and for non-muslim includes adopted children and
adoptive parents.
 Promise made in compensation of something
voluntarily done in the past; the promise made by the
promisor to the promisee AFTER the promisee had
done/help the promisor without the promisor asking
him to do so. For example, Anna was drowning. Elsa
who swam nearby help to save Anna. Anna later on
promise to pay some money to Elsa for her kindness.
This promise is binding.
Exceptions: the situation when
a consideration is not required.

 Promise made to compensate something

which the promisor is bound under the law
to do; for example, Sam gave a lift to Zizan on
his way home. The car driven by Sam was
stopped by the patrolling police for excessive
speeding. Sam were fined for RM300-00. As
he had not enough money, Zizan helped pay
the fine. Sam promised to pay back and his
promise is binding.
Exceptions: the situation when
a consideration is not required.

 Promise made to pay debt which is already barred

by limitation law; in Malaysia, the Limitation Act
1953 prohibits the initiation of a civil action after 6
years from the date when the cause of action accrued.
This is also known as statute-barred debt.
 For example, Hamim entered into an agreement for
personal loan with Bank ABCD. The period of facility
is 5 years beginning June 2012. Due to economic
downturn, Hamim lose his job and was unable to pay
the loan after 2 years, which is May 2014. ABCD
Bank has 6 years to sue Hamim from May 2014.
 Nowhere mentioned in the
4th Contracts Act.

Element:
intention
to create
legal So, the courts made an
approach to determine
relations whether a party has the
intention to be bound or not
by the agreement.
HUBBY &
BINI
(WIFE)
A PROMISE MADE BY HUSBAND TO A
WIFE, OR A WIFE TO A HUSBAND, IS IT
BINDING???
4th Element: intention to
create legal relations
 Objective test: “Whether a reasonable
person, looking at the parties’ words and
conduct, would consider there to be an
intention to create legal relations.”
Presumptions by the
courts:
 Social & Domestic  Commercial
Agreement: the parties Agreement: the parties
has no intention to be has the intention to be
bound. bound.
 Eg: Balfour v Balfour  Eg: Rose v Frank
[1919] 2 KB 571 Crompton Bros
 However, presumption  However, presumption
is rebuttable. is rebuttable.
 Eg: Merritt v Merritt  Eg: Yap Eng Thong v
[1970] 1 WLR 1121 Faber Union Ltd
 Balfour v Balfour : t he court held a husband’s
promise t o maint ain his wife is a marit al obligat ion,
not t o be bound by t he court of law.

Conclusion: The husband has no intention to

Presumptions create legal relation at the time of making the
promise.

by the Merrit t v Merrit t: the court held a promise by t he

courts: husband whom has left t he mat rimonial house t o
live wit h ot her woman is no longer a marit al
obligat ion, hence he was bound t o keep it .

Conclusion: The husband has intention to create

legal relation as both husband and wife were no
longer in good term.
IS MOU
BINDING?
 What is MOU?
 Memorandum of Understanding
between two parties.
 The parties outlined their
agreement basically in friendly
terms.
 They don’t have intention to be
sued if they fail to fulfill their
promise/ part of their obligations
under the Mou.
 So… question is, does Mou has
legal effect?
5th element: capacity to
contract
Section 11 of CA 1950
Age of Majority Act
GENERAL 1961
RULES Employment Act 1955
Chilldren and Young
Persons (Employment) Act
LEGAL 1966

CAPACITY Contract of Necessaries

Contract of Scholarship
Contract of Marriage
EXCEPTIONS
Contract of Insurance
Contract of
Aprrenticeship
is a child has
a capacity to
contract?
Section 11: Ev ery person is competent
to contract who is of the age of
majority, sound mind and not
disqualified by any law to which he is
subject.
5th element: capacity to
contract

General Rule: a child is incapable of

making contract.
❖ Suitable age to enter into contract under
the law is 18 years old (Referring to the
Age of Majority Act 1971)
❖ Section 11 CA 1950: “competent”
means must be 18 years of age, sound
mind & not a bankrupt.
❖ If an adult has any dealings with a child,
the liability is on the adult.
5th element: capacity to
contract
 See: Mohari Bibee v Dharmodas Ghouse
 Case: Tan Hee Juan v The Boon Keat [1934]
MLJ 96
 Held: Transfers of land executed by an infant
were void; ie it cannot be enforceable by the
law.
5th element: capacity to
contract
 EXCEPTION:
 Contract of Necessaries: a child’s necessaries
depends very much on the status or lifestyle of
the child himself. For a normal secondary
school student, fancy and expensive dresses
cannot be included as necessaries, but for Mia
Sara, who became an actress at a young age,
fancy and expensive clothes are necessaries.
A child buys a box of colour pencil, or
chocolates, or ice creams.. Cakes.. is the
contract valid?
5th element: capacity to
contract
 EXCEPTION:
 Q: Is holiday considered as necessary?
 A: Elkington v Amery: the court held that holiday is a
necessity if it were for convalescence after illness, or
the minor’s condition of life is such that holidays
spent in hotels were an inevitable part of it.
Necessary
depends very
much on 2
conditions:
 Actual requirement at
the time of the sale &
purchase
 Conditions of life of
the infant.
Contract of
apprenticeship

For example, Luqman

Hakim Samsuddin,was
trained alongside Premier
League Cardiff City when
he was 17 years old.
He is offered to play for
KV Kortrijk, of Belgium
effective March 2020 after
he turns 18 years old.
6th element: Certainty
of the contract
Ifa contract is not certain, it is
VOID – Section 30 CA 1950
 Karupan Chetty v Suah Thian
 A: An agreement
Q:What is void
that is invalid right
agreement?
from the outset.
7th element:
free
A: A contract that
consent/ What is voidable can be cancelled
at the option of one
voidable or agreement?
party.
void
agreements Q: What is voidable
A: Agreements that
made without the
holiday free consent of a
agreement? party to the
agreement.
7th element: free consent/
voidable or void
agreements
 Q: What are the effects of a voidable agreement?
 A: The innocent party may insist the contract be performed, or
may cancel the contract. –Section 19(1) of the CA1950.
 Illustration of Section 19 (1) of the CA 1950:
 (a) A, intending to deceive B, falsely represents that 500
gantangs of indigo are made annually at A’s factory, and
thereby induces B to buy the factory. The contract is voidable
at the option of B. [FRAUD]
7th element: free consent/
voidable or void
agreements
 (b) A, by a misrepresentation, leads B erroneously to believe
that 500 gantangs of indigo are made annually at A’s factory.
B examines the accounts of the factory, which show that only
400 gantangs of indigo have been made. After this, B buys the
factory. The contract is not voidable on accounts of A’s
misrepresentation. [MISREPRESENTATION]
 (c) B, having discovered a vein of ore on the estate of A,
adopts means to conceal, and does conceal, the existence of
ore from A. Through A’s ignorance, B is enabled to buy the
estate at an undervalue. The contract is voidable at the option
of A. [FRAUD]
7th element: free consent/
voidable or void
agreements
 (d) A is entitled to succeed to an estate at the death of B; B
dies; C, having received intelligence of B’s death, prevents the
intelligence reaching A, and thus induces A to sell him his
interest in the estate. The sale is voidable at the option of A.
[FRAUD]
7th element: free consent/
voidable or void
agreements
Fraud

Undue Coercio
Influenc n
e Consent
not freely
given

Misrepres Mistak
entation e
7th element: free
consent- COERCION
 General rule: If a person is forced to enter into an
agreement, it means he does not consent or voluntary to
enter into the contract. Thus, his consent is said to be
vitiated.
Section 15 CA 1950 cross refer Penal Code.
Note however, it is immaterial whether the Penal Code is or
is not in force in the place where the coercion is employed.
Effect: Contract is voidable –Section 19(1)
See: Chin Nam Bee Development Sdn Bhd v Kim Choo & 4
Others.
  Illustration:
 A, on board of an English ship on the high seas,
7th causes B to enter into an agreement by an act
amounting to criminal intimidation under the Penal
element: Code.
 A afterwards sues B for breach of contract in
free Taiping.

consent-  A has employed coercion, although his act is not an

offence by the law of England, and although section

COERCION 506 of the Penal Code was not in force at the time
when or place where the act was done.
 Case: Kesarmal s/o Letchman
7th Das v Valiappa Chettiar [1954]
20 MLJ 119
element:
free A executed a transfer of land
consent- in the presence of 2 Japanese
officer (during Japanese
COERCION occupation in Malaya) and
the court held that such
transfer was voidable.
7th element: free consent-
undue influence
Section 16 CA : When a contract is made between 2
parties, whereby one party is of higher position than the
other, and he uses his position to obtain unfair advantage
over the other, such contract is entered into under undue
influence.
Effect: Contract is voidable –Section 20
See: Dato’ Jaginder Singh & Ors v Tara Rajaratnam
7th element: free
consent - MISTAKE
MUTUAL MISTAKE
 1) Mistake as to identity of
the subject matter
 2) Mistake as to existence
of the subject matter
 3) Section 21 CA 1950: the
agreement is VOID if there
is mistake as to the facts
essential to the agreement.
UNILATERAL MISTAKE
 1) One party mistake.
 2) Section 23 CA 1950: the
agreement is VALID if
mistake is done by one
party only.
 Exception:
 (i) mistake as to term
 (ii) mistake as to document
 (iii) mistake as to identity
7th element: free
consent - MISTAKE
Identity
Case: Raffles v
Wichelhaus

Mutual mistake

Existence
Case: Coutier v Hastie
 REMEMBER!

7th
element: Both parties mistake: CONTRACT
VOID, Section 21

free
consent - One party mistake: CONTRACT
VALID, Section 23

MISTAKE
One party mistake that falls
under any of the exceptions:
CONTRACT VOIDABLE, Section
23
 REMEMBER!

7th
element: Contract entered into
through fraud,
free misrepresentation &
coercion : CONTRACT
VOIDABLE, Section 19(1)
consent –
SUMMARY Contract entered into
through undue influence:
CONTRACT VOIDABLE,
Section 20
Discharge of contract

Performance

Agreement

Frustration

Breach
Discharge of contract

 Discharge by performance: Happens when the parties

performed their promises. Eg, Abu agreed to sell his
motorcycle to Hassan for RM5,000. Abu delivered the
motorcycle and Hassan paid Abu the price.
 In the context of holiday contracts, the parties are discharged
by way of performance when the hotel or inn provides the
accommodation as booked by the customer and the customer
pay the fee.
Discharge of contract

 Discharge by agreement: Happens when the parties agree that the

contract should come to an end.
 S 63 CA 1950: if the parties agree to substitute a new contract, alter
the previous contract with a new term, or terminate the contract, the
original contract shall not be performed.
 E.g: Farah entered an agreement with Rafique, an interior designer
to renovate her kitchen. They agreed that the kitchen should be
painted with Nippon Paint Bright Yellow. Due to short supply, they
agreed to change the colour to Nippon Paint Cool Yellow. The
renovation can be continued with the new term (colour) and the
previous term (colour) shall be disregarded.
Discharge of contract

 S64 CA 1950:
 (i) Payment of smaller sum in discharge of larger sum
 E.g: Thoriq borrowed RM500 from Qisya and promise to pay the
same after three days. On the day when the payment is due, Thoriq
informed Qisya that he only had RM450 with him. Qisya agreed to
accept the money. Here, Thoriq is discharged of his debt by Qisya’s
acceptance.
 (ii) Part payment of somebody else in discharge of a debt
 E.g: Siti owes Halim RM400 but Sarah, Siti’s sister paid RM350 on
her behalf. Halim cannot claim Siti the balance anymore.
Discharge of contract

 S64 CA 1950:
 (iii) A discharge of unascertained amount owing under a
contract by an agreed sum in satisfaction of it.
 E.g: Ahmad and Goh are old friends and was a business
partners. Ahmad remembered owing some money to Goh but
could not recall the amount. Goh accepted Ahmad’s offer to
pay RM10,000 in satisfaction of the unascertained amount of
debt. Ahmad is discharged by agreement.
Discharge of contract

 S64 CA 1950:
 (iv) Arrangement of settlement of debts between a debtor and
his creditors where the creditors agree to accept a stated
amount or certain percentage of his debt in full satisfaction.
 E.g: Suraya owes PTPTN RM36,000 as her education loan.
PTPTN agreed to accept RM30,000 in full satisfaction of the
debt if Suraya pay lump sum before end of 2020. Suraya’s
contract with PTPTN is discharged by agreement.
Discharge of contract

 Discharge by frustration: happens when there are unexpected

situation which radically changes the terms promised in the
agreement.
 (refer to the next slide)
Discharge of contract

 Discharge by breach: when one of the parties fail to carry out

his promise in the contract.
 Eg: Jaja ordered one lorry of assorted roses from Lim Garden.
The consignment is due in 2 days. After 2 days, Jaja still has
not receive the flowers. Here, Lim Garden has breached the
contract with Jaja. Jaja has the right to sue for remedies.
 Note: If a contract is discharged by way of breach, the
innocent party has the right to get remedies.
 Cf: topic remedies.
 Damages

• Monetary compensation
• May cover actual & special loss

Specific Performance
Remedies • Will only be granted by court if money is not adequate
remedy
for Injunction
breach of • An order to restrain the other party from continuing the
breach action.
contract • Types: Permanent & Temporary

Quantum Meruit

• A monetary compensation in a situation when the innocent

party is unable to prove the amount of loss; the court will
grant “as much as he had earned”
Discharge by way of
frustration of contract

Destruction of subject matter

• Taylor v Caldwell

Supervening events defeat the whole purpose of the contract

• Krell v Henry

Death or incapacity of the contracting parties

• Condor v The Baron Knights

Supervening illegality

• Vape, Paraquat, Daun Ketum etc

 Discharge by way of
frustration of contract
 Total destruction of subject matter: subject matter of
the contract is the reason why the contract is entered at
the first place. For example, an agreement to hire a hall
for the purpose of a wedding. If the hall is destroyed in
a fire, the subject matter is gone, thus render the
contract cannot be performed.
 Case: Taylor v Caldwell
 There was a contract to perform four concerts in a hall.
However, prior to the first contract, the hall was burnt
in a fire. The court held that the contract was frustrated.
 Discharge by way of
frustration of contract
 Case: Tsakiroglou & Co Ltd v Noblee Thorl
GmbH
 In this case, there was a contract to sell a quantity
of groundnuts to Noblee Thorl. The goods were
to be shipped from Sudan to Hamburg during
November or December. The usual route was by
way of Suez Canal. However, the Suez Canal was
closed from November until five months later and
Tsakiroglou refused to deliver the groundnuts and
claim frustration of contract.
 Discharge by way of
frustration of contract
 Case: Tsakiroglou & Co Ltd v Noblee Thorl
GmbH
 The court held that there is no frustration of
contract as Tsakiroglou can use other
alternative route to deliver the groundnuts.
 Supervening illegality: happens when an
action/ activities becomes illegal due to
changes of law or government proclamation.
 Discharge by way of
frustration of contract
 Supervening event defeats the whole purpose of the
contract: for example a wedding hall was booked for a
wedding reception. However, 2 weeks before the
reception takes place, the wedding was cancelled,
hence the contract to hire the wedding hall is frustrated.
 Death or incapacity of the parties: for example, a
singer was hired to sing for a month in a club. 2 days
before she is due to sing, she contracted a severe throat
problem which unable her to perform. The contract is
frustrated.
 Remedies IF THE
CONTRACT IS FRUSTRATED
Section 66 of the Contracts Act 1950
•“Any person who has received any advantage under the
agreement is bound to restore it or make compensation to it”

Section 15(2) of the Civil Law Act 1950

• “Money due but not paid, ceases to be payable”